Question

How did India respond to the situation when its balance between imports and exports deteriorated beyond expectation and it did not have sufficient foreign currency reserves to pay for imports?

• A. India borrowed loans from foreign countries.
• B. India restricted imports from other countries.
• C. India imposed heavy taxes on imports.
• D. India adopted the New Economic Policy.

Answer 1

The correct option is D India adopted the New Economic Policy.

Responding to the financial crisis of 1991, India adopted the New Economic Policy of liberalisation, privatisation, and globalisation. India allowed private players and foreign investment. They promoted foreign trade to strengthen economic development. These policies not only saved the Indian economy from the crisis but also helped change the pace of growth.